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How to achieve centralisation and GAG pooling

Posted by Pam Tuckett on October 29, 2018

How to achieve centralisation and GAG pooling

Following my blog earlier this year, a central issue for academies, I thought it would be useful to explain in a bit more detail how a Trust can go about becoming more centralised.

Here at Bishop Fleming we understand the difficulties a multi academy trust may experience when trying to centralise its finance function. We can help you with this journey.

Schools will join a multi academy trust (MAT) for two key reasons

1.  A school may be failing and need to find either a sponsor or a MAT to take them on if the position has not yet become critical. Effectively this is a distressed transaction and the school joining is in a week bargaining position. The failing school therefore has to adopt the conditions imposed upon it by the MAT.

2.  A good or outstanding School may choose to join a multi academy trust. This is a transaction of choice and the school joining the MAT typically expects to retain a level of autonomy in the school itself. This will often include retaining local purchasing power, local control of budgets and possibly a seat on the main trust board. The reality is that if these conditions were not accepted by the MAT, then quite simply these transactions would not happen.

In scenario one it is easy for the MAT to implement centralisation because the school joining is in a weak position and usually needs help. Any MAT that is not doing this needs to urgently review its central function.

In scenario two centralisation is much more difficult to achieve. What we see is that in order to do this in an effective and orderly fashion the following process needs to be followed:

1. Centralise the money into one central bank account to engender a culture of all pupils in the MAT being the focus rather than pupils in each individual school.

2. Centralise the budgeting process (involve each school but retain control in the central team) and set the budget with reference to need not income.  The ordering process for certain budget lines such as curriculum spend can be retained by the school while key expenses such as capital/repairs and insurance will be procured by the central team. All invoice processing and payment should be based in the central finance team. Budgets will normally be controlled and monitored centrally with each school retain responsibility for local budget lines. It is critical that the scheme of delegation is thoroughly reviewed to ensure it matches the new procedures.

3. GAG pooling in year GAG income is the next step. It is crucial that the MAT develops a suitable GAG pooling policy. This is a similar concept to a shareholders agreement in the commercial world. MATs may not see the need to formalise a policy but it will be critical in the event of a dispute or if a school is rebrokered out of the MAT.

4. The last step is to GAG pool reserves. This is the ultimate shift in culture in a MAT and may take a while to implement.

There are significant change management issues that you will encounter on your journey to centralisation and GAG pooling.

If you would like guidance on how to proceed please contact me on 01752 262611.